How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding JBG SMITH Properties (NYSE:JBGS).
Is JBGS a good stock to buy now? JBG SMITH Properties (NYSE:JBGS) has seen a decrease in hedge fund sentiment in recent months. JBG SMITH Properties (NYSE:JBGS) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 25. Our calculations also showed that JBGS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are tons of gauges stock traders can use to appraise their holdings. Two of the less utilized gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can outpace the S&P 500 by a solid amount (see the details here).
Martin Whitman of Third Avenue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let's take a gander at the new hedge fund action regarding JBG SMITH Properties (NYSE:JBGS).
Do Hedge Funds Think JBGS Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -32% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in JBGS a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Long Pond Capital held the most valuable stake in JBG SMITH Properties (NYSE:JBGS), which was worth $105.8 million at the end of the third quarter. On the second spot was V3 Capital which amassed $97.5 million worth of shares. Third Avenue Management, Renaissance Technologies, and Ulysses Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position V3 Capital allocated the biggest weight to JBG SMITH Properties (NYSE:JBGS), around 22.33% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, designating 4.05 percent of its 13F equity portfolio to JBGS.
Because JBG SMITH Properties (NYSE:JBGS) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers that elected to cut their positions entirely heading into Q4. Interestingly, Eduardo Abush's Waterfront Capital Partners said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, valued at close to $3.3 million in stock. Charles Davidson and Joseph Jacobs's fund, Wexford Capital, also cut its stock, about $1.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 8 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to JBG SMITH Properties (NYSE:JBGS). These stocks are UniFirst Corp (NYSE:UNF), Enstar Group Ltd. (NASDAQ:ESGR), Apache Corporation (NASDAQ:APA), bluebird bio Inc (NASDAQ:BLUE), TCF Financial Corporation (NASDAQ:TCF), Flowserve Corporation (NYSE:FLS), and Canada Goose Holdings Inc. (NYSE:GOOS). This group of stocks' market caps match JBGS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNF,19,95832,0 ESGR,13,343430,1 APA,42,508289,2 BLUE,35,322436,-2 TCF,11,60244,-3 FLS,19,197860,-11 GOOS,21,190815,1 Average,22.9,245558,-1.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $246 million. That figure was $269 million in JBGS's case. Apache Corporation (NASDAQ:APA) is the most popular stock in this table. On the other hand TCF Financial Corporation (NASDAQ:TCF) is the least popular one with only 11 bullish hedge fund positions. JBG SMITH Properties (NYSE:JBGS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for JBGS is 27.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on JBGS as the stock returned 17.9% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.